The lustre of Indian lab-grown diamonds (LGDs) has dimmed significantly in FY24, with prices plummeting by 45% due to a global oversupply. As a result, LGD exports from India saw an 18.2% decline in April, totalling $83.77 million, as consumers increasingly turn to LGDs amidst soaring gold prices to economize on jewellery expenses.

The downward spiral in LGD prices can be attributed to a staggering 33% surge in global production, reaching 40 million carats in FY24 compared to the previous fiscal year. With India alone producing 16 million carats of LGDs in FY24, the market has witnessed a flood of supply that has outpaced demand, resulting in a sharp depreciation of prices.

Pooja Sheth Madhavan, Managing Director of Limelight Diamonds, voiced concerns over the substantial drop in LGD prices, warning that further declines could spell dire consequences for manufacturers. She highlighted the challenges faced by newcomers in the LGD industry, emphasizing the prolonged repayment period for loans taken to acquire LGD machines, which has become a significant barrier to entry.

Interestingly, the turmoil in the LGD market has prompted established players in the natural diamond sector to pivot towards LGDs. Disruptions caused by G7 sanctions on diamonds from Russia's Alrosa mines, coupled with sluggish exports to key markets like the US and China, have incentivized natural diamond players to diversify their portfolios and venture into LGDs.

India now boasts a staggering 6,000 LGD reactors, with the number of companies entering the LGD market steadily increasing. Tony Mehta, founder of Gogreen Diamonds, highlighted the surging demand for LGDs both domestically and internationally, with India emerging as a significant market for these more affordable alternatives to mined diamonds.

While LGDs offer a cost-effective alternative to natural diamonds, with prices substantially lower at Rs 35,000 per carat compared to Rs 4-4.5 lakh for mined diamonds, the natural diamond market has stabilized after a volatile period in the first half of FY24. However, major players like Tanishq are closely monitoring the evolution of the LGD sector in India, although they currently have no plans to enter this burgeoning market.